Technical View: Nifty forms bullish candle; 10141-10163 crucial for bulls
Finally! Some green on D-Street but the Nifty50 failed to close above its crucial 200-days exponential moving average placed around 10,163 on Tuesday. The index formed a bullish candle on the daily closed above 10,100 but below its 200-DEMA placed around 10,163.
After falling for five consecutive sessions, the Indian market witnessed some bit of value buying along with short coverings at lower levels. However, the way, Nifty corrected from its intraday high, shows that the pain may not be over for markets but a pullback rally might be on the cards.
For bulls to remain in control, Nifty has to cross 10,141 levels and then 10,163 which is the crucial 200-DEMA in the next few trading sessions. If the index manages to hold above these levels then a rally could stretch towards 10,276 levels.
The Nifty50 opened at 10,051 and rose to an intraday high of 10,155. It slipped to an intraday low of 10,049 before closing the day 30 points higher at 10,124.
“Bulls appear to have made a genuine attempt to pull back from the intraday low of 10049 levels which is close to critical support zone of 10040 – 9980 levels and went on to sign off the day with an opening Marubozu kind of technical formation in which opening and low point of the day are same,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Besides, momentum oscillators are not making new swing low along with new swing low made by Nifty50 which facilitated a positive divergence on daily RSI chart after Tuesday’s positive close,” he said.
Technical chartists suggest that as Bank Nifty also refrained from making new swing low along with Nifty50 there can be a higher possibility of it registering a double bottom around 24000 kinds of levels.
“Even if Nifty Bank breaches 24000 level then also downsides for this index appears to be limited as critical support on long-term charts is placed in the zone of 23900 – 800 levels where we expect it to bottom out. Hence, based on this technical evidence traders should not be surprised if Nifty50 stages a pullback rally from current levels,” said Mohammad.
India VIX fell down by 1.34 percent at 15.60. A pause in the upswing of volatility has given some stability to market but VIX has to decline below 13.50 to see the change in market trend, suggest experts.
On the options front, maximum Put open interest is seen at 10000 followed by 10100 strikes while maximum Call open interest is seen at 10500 followed by 10400 strikes.
Fresh Call writing in all the strikes from 10100 to 10300 strikes while meaningful Put writing was also seen at 10100 and 10000 strikes. Put writing is seen at lower strikes and intact Put OI at 10000 strike suggests a major support.
“Intact Call writing is going to restrict it upside momentum for a smooth ride. Option band signifies a broader trading range between 10000 to 10250 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“Nifty witnessed a tough fight between bulls and bear in the range of 10090 to 10150 zones in the second part of the session. Finally, it closed with the gains of around 30 points and formed a Bullish candle similar to a Bullish Belt Hold on the daily scale which indicates a short-term bounce from current zones,” he said.
Taparia further added that Nifty has to cross and hold above 10141 zones to witness an up move towards 10276 zones while on the downside supports are seen at 10050 then psychological 10000 marks.